Federal Employees: The Federal Employees Retirement System (FERS)

What is the Federal Employees Retirement System (FERS)?

Most federal employees hired on or after January 1, 1984, are automatically covered by the FERS, a three-tier retirement system encompassing benefits provided by Social Security (tier one), the Basic Benefit Plan (tier two), and the Thrift Savings Plan (tier three).

What benefits are provided under FERS?

Social Security benefits

Unlike workers covered under the older Civil Service Retirement System (CSRS), federal workers under FERS pay Social Security taxes on their earnings. This means that if you are covered by FERS, you are also entitled to receive Social Security benefits (including Medicare) when eligible. However, the benefits you receive under FERS are designed to coordinate with the Social Security benefits you receive. In certain cases, what you receive from FERS will reduce the amount of your Social Security benefit, or you may receive additional benefits under FERS if you retire before becoming eligible for Social Security. For more information on this, see our separate topic discussion, Integrating Social Security Retirement Benefits with Other Retirement Plans.

Basic Benefit Plan annuity and supplement

The heart of FERS is the Basic Benefit Plan. This plan pays retirement, survivor, and disability benefits to qualified FERS employees. Most FERS Basic Benefits are paid as monthly annuities. To be eligible for benefits, you have to meet certain length-of-service requirements and, in the case of retirement benefits, age requirements. The amount of retirement benefit you receive will depend on your average pay and the age at which you retired. If you retire before becoming eligible to receive Social Security retirement benefits (age 62), you may receive a Special Retirement Supplement in addition to your basic annuity. This supplement approximates the Social Security benefit you earned while employed by the federal government.

Example(s): Clarissa retired at age 60 after she had worked for the federal government for 20 years. She began receiving a retirement annuity under FERS. Since she was not yet eligible to receive Social Security benefits, she also received a supplemental annuity. She continued to receive the supplemental annuity until she turned 62 and became eligible for Social Security retirement benefits.

The Thrift Savings Plan

Similar to a 401(k) plan, the Thrift Savings Plan (TSP) is a tax-deferred retirement savings vehicle automatically set up for employees under FERS. The government contributes 1 percent of your basic pay each pay period to the plan and matches (up to a certain limit–see table below) contributions you make to the plan. Your contributions can be pre-tax or Roth (or a combination of the two).

Example(s): Cesar retired from government service at age 62. Over the years, he had contributed 3 percent of his basic pay each pay period to his TSP. The government had matched those contributions dollar for dollar and also contributed an additional 1 percent of Cesar’s basic pay to his account each pay period. By the time Cesar retired, he had accumulated over $70,000 in his thrift account. He elected to receive an annuity that paid him $575 a month for the rest of his life.

How is FERS funded?

FERS is funded by contributions from both the employee and the federal government. The following table illustrates how FERS is funded:

FERS Benefit

Employee Contribution

Federal Government (Employer) Contribution

Social Security (including Medicare)

7.65% of earnings up to maximum wage base

7.65% of earnings up to maximum wage base

Basic Benefit Plan

.80% of earnings

Varies according to formula

Thrift Savings Plan

Up to 100% of the basic pay earned each pay period, up to the IRS limit of $17,500 in 2013 ($17,000 in 2012)*

1% of basic pay plus $1 of every dollar employee contributes up to 3% of basic pay; 50 cents for every dollar employee contributes thereafter, up to a total of 5% of basic pay each pay period

* Thrift Savings Plan participants who are age 50 and older can make yearly “catch-up” contributions to their TSPs. These contributions can be made over and above the regular contribution limits. Those who are age 50 and older can contribute an additional $5,500 to their TSPs in 2013 (and 2012). (The annual catch-up amount is adjusted annually for inflation.)


Who is covered under FERS?

Federal employees hired on or after January 1, 1984.

Most federal employees hired on or after January 1, 1984, are automatically covered by FERS.

Employees who transfer to FERS from the Civil Service Retirement System

You may also be covered by FERS if you elected to transfer to the system from the CSRS during a special transfer period in 1987. You may also be covered by FERS if you previously worked for the government under CSRS, left government service, and are now working for the federal government again. In this case, you are automatically covered if you left federal government service and returned after more than one year and you have less than five years under CSRS. Otherwise, you may have to transfer to FERS under special rules. For information on transferring to FERS, contact your agency’s personnel office or the Office of Personnel Management’s website at www.opm.gov.

Example(s): Karen worked for the federal government under CSRS from 1993 to 1995. In 2013, she was re-employed by the federal government. Because she had less than five years of CSRS service and returned to federal service after being away from it for more than a year, Karen was now automatically covered by FERS.

Employees excluded from coverage

A few employees are specifically excluded from coverage under FERS. These employees include persons not covered by Social Security, employees whose appointments are limited to one year or less, and certain persons with nonfederal service that is creditable under the Civil Service Retirement System.

Special groups of employees covered by FERS

A few groups of employees are paid annuities according to special rules:

Group

Conditions

Benefit

Firefighters, Law Enforcement Officers and Air Traffic Controllers

Contribute an extra 0.5% of pay to FERS

Can receive unreduced benefit at age 50 with 20 years of service or at any age with 25 years of service. The annual annuity is 1.7% of high-3 average pay times years of service plus 1.0% of high-3 average pay times years of service exceeding 20

Military Reserve Technicians

Loses military status required to maintain position

May retire and receive an unreduced annuity if you are at least age 50 with 25 years of service

Part-Time Employees

None

In calculating annuity, average high-3 consecutive years of pay will be based on full-time rate, then reduced according to part-time schedule

Members of Congress and Congressional Employees

Contribute an extra 0.5% of pay to FERS

Members of Congress receive an unreduced annuity at age 50 with 20 years of service or at any age with 25 years. Congressional employees are subject to same rules as other employees. Annuities for both groups with at least 5 years of Congressional service will be 1.7% of high-3 average pay times years of service up to 20 plus 1% of high-3 average pay times any other service


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